SOCIETY Labour and the OECD
©AFL/CIO
Government actions, at both the national and international levels, were guided by a Keynesian consensus featuring a balance between free markets and effective government regulation, full employment, robust social protection and strong unions. In reaction to the stagflation of the 1970s, however, the Keynesian consensus on economic policy collapsed and was replaced by neo-liberal policies that placed undue confidence in free markets, reduced the regulatory role of government at all levels, reduced social protection and weakened unions in the name of labour market “flexibility”.
John Sweeney is on the left and leads from the front
A stress test for the OECD? John Sweeney, President of the AFL-CIO*
To be useful in helping countries to move out of the crisis, it is necessary for the OECD to look at its own history as an organisation and draw the right lessons for the future.
T
oday, as OECD ministers meet and we debate how to attain a “cleaner, stronger, fairer world economy” at the OECD Forum, we face the most serious economic crisis since the Great Depression. Recovering from this crisis, addressing the underlying economic imbalances that caused the crisis and reforming the structure of global economic governance are the most serious challenges that governments have faced since the Second World War. Sixty years ago, when the Trade Union Advisory Committee (TUAC) was formed, under the European Recovery Programme, the world was emerging from a long night of
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OECD Observer
No 273 June 2009
global depression and war. The industrial nations were creating the arrangements of the post-war global economy: the Marshall Plan and the reconstruction of war-torn economies, and the establishment of the United Nations and the Bretton Woods institutions. Coming out of the Great Depression and the Second World War, the founders wanted a global order in which nations could grow and people could thrive. Governments regulated currencies while giving nations the space to stimulate growth. They curbed speculation while fostering real investment. They emphasised rapid growth, full employment, social protection and labourmarket institutions to allow wages to rise with increasing productivity. The system they created was far from perfect. Much of the world was outside their focus. But in the industrial world, we enjoyed a quarter century of rapid growth and development. And, with full employment and strong unions, we built the vibrant middle classes that are the foundation of our democracies.
In response, much of TUAC’s advocacy, from the early 1980s until today, has been to resist government polices that have slowed economic growth, produced serious structural imbalances in exchange rates, privileged financial innovation over effective regulation, weakened social protection and unions, and produced growing inequality within and between countries. As the OECD meets in the midst of a global economic crisis, we may be at the beginning of a new phase of history. In 1948, the industrial nations had to create new institutions to revive investment and trade. In 2008, an expanding number of nations must engineer the recovery from a deep global recession, re-regulate global capital markets and create a more effective system of governance for an increasingly global economy. We cannot return to a narrow interpretation of Keynesian policies designed for a much simpler period, but neither can we any longer tolerate the lack of effective global economic management and the excesses of free markets. We must chart a new course going forward to deal with the very different and more challenging global economy of the 21st century. Just as the founders of the post-war economy had to understand and respond to the causes of Global Depression and World War, it is vital that we understand and respond to the causes of today’s global economic and financial crisis.
